The House of Representatives has instructed its Committees on Banking Regulations and Banking Institutions to carry out an investigative hearing regarding the failure of commercial banks and financial institutions to comply with the Central Bank of Nigeria’s (CBN) directives on the Net Open Position (NOP) Limits.
The CBN had issued a circular on January 31, 2024, directing that the NOP limit “should not exceed 20 per cent short or 0 per cent long of shareholders’ funds unimpaired by losses using the Gross Aggregate Method.” The circular further mandated banks exceeding these limits to bring them within prudential limits by February 1, 2024.
During a plenary session, the House adopted a motion on the urgent need for banks to implement CBN’s policies on holding excess long foreign exchange and NOP limits. The motion, brought by Babajimi Benson, the representative for Ikorodu Federal Constituency, emphasized the CBN’s authority to regulate monetary policies and issue directives to commercial banks.
Benson highlighted the recent rise in the dollar-to-naira exchange rate and attributed it to various market forces and government economic policies, including the liberalization of the dollar. He expressed concern that commercial banks tend to withhold a significant portion of forex, obtained through purchase, borrowing, or CBN allocation, instead of lending it to customers, contributing to speculative activities and exacerbating economic challenges.
The legislator noted that the CBN had introduced new monetary policies, including the NOP limits, to address these issues, but commercial banks and financial institutions have been hesitant to implement them. He argued that legislative measures are crucial to enforcing these directives and preventing further economic consequences.
In response to the motion, the House mandated its Committee on Legislative Compliance to ensure the full implementation of CBN’s directives by commercial banks and financial institutions.
